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January 5, 2018 | Author: Anonymous | Category: Social Science, Political Science
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Bray – Pi – Russell – Tassin – Wang

AGENDA

• Diversifying Internationally • Examining International Asset Allocation • Selling the Clients • Analyzing the Data • Presenting our Recommendations

Bray – Pi – Russell – Tassin – Wang

DIVERSIFYING INTERNATIONALLY • 2013 saw record-breaking domestic equity market returns • S&P 500 – 29.6% gain • DJIA – 26.5% gain • MSCI EAFE – 22.6% gain • Sandra Meyer, Founder, CapGlobal Advisors • Henry Bosse, CIO, Local State Pension Fund

Bray – Pi – Russell – Tassin – Wang

EXAMINING INTERNATIONAL ASSET ALLOCATION • Diversify portfolios with international holdings • Alleviate unsystematic risk • Unsystematic risk – “company” risk that is reducible through diversification • Extensive research on international markets • Quantitative modeling suggests that international asset allocation works

Bray – Pi – Russell – Tassin – Wang

SELLING THE CLIENTS Client Resistance to International Holdings • Familiarity with domestic companies and markets • Impression of mature markets as safe • Ethnocentrism • Easier to stay informed on just one market

Bray – Pi – Russell – Tassin – Wang

SELLING THE CLIENTS Educate Clients On: •

Benefits of international diversification



Drivers and consequences of correlations among global equity markets



Impact of currency movements on returns of global portfolios



Annualize returns and deviations to ease client understanding

Bray – Pi – Russell – Tassin – Wang

ANALYZING THE DATA ① Returns and standard deviations of international and domestic markets, 1991-2001 and 2002-2013 ② Correlations between markets, 1991-2001, 20022013, and 1991-2013 ③ Annual returns of Morgan Stanley’s EAFE and EM indices compared to S&P 500 ④ Portfolios with mixes of foreign and U.S. equities, 1991-2001, 2002-2013, and 1991-2013 ⑤ Efficient frontier of foreign and U.S. equities

Bray – Pi – Russell – Tassin – Wang

QUESTIONS

Bray – Pi – Russell – Tassin – Wang

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